We are early stage and have some longer term receivables we'd like to factor. Now I just need to know who would be good. Thank you.
Looking for receivables factoring provider recommendations for SF Bay Area
Answers
Dan, I've begun working with a group that provides A/R factoring as well as other credit products. I could refer you to if you are interested. You can reach me at [email protected]
We use Suntrust Bank. Rates differ, but I think we are being charged 3.75% interest rate...I believe this varies based on the rating of your customer. You should be able to find a contact online.
Graystone Capital does (http://graystonecap.com/invoice-factoring) as well as SVB (Silicon Valley Bank) and Square1 - although they might move you towards a receivables line of credit (LOC) rather than straight factoring. Similar, but different.
Several of our vendors have been working with Phoenix Capital for the past couple of years. You may want to look them up.
We did a Recievables line with SVB. There are some serious pros, like their flexibility, and that you keep the AR in house. The startup cost is significant, however (legal fees et al). For us it worked well.
Bridge Bank is an active leader in this area. I would definitely recommend checking with them. I can provide intro if necessary.
I am in a business group with Carrie Jenkins at UC Factors and her company is very well respected for their ability to get deals done. Her e-mail is [email protected]
We used CIT and also Wells Asset based Group. As a recommendation, if you factor or finance with certain companies them they handle the collections, and their desire is to collect by whatever means possible. Their collection efforts may not not fall in line with repeat business for you. So think twice before you hand over your customer to someone else. I have found that asset based lenders are negotiable and as you develop more experience with them they will improve on your advance rate, all of this while you are in control of your customers. When you get a proposal do not think this is the final answer, push back and you will be surprised what terms you could get. We had a 88% advance rate on receivables up to 120 days old, and very reasonable and achievable financial covenants. Remember you want to spend time running your business not managing your covenants, be forceful.
There are two inherent situations that you must examine. First if you need the credit insurance? Are you concerned with a customers’ ability to pay when due? If so than Factoring should be the venue you should pursue. Remember in Factoring you are selling the receivable to the Factor and if the account is credit approved then on due date they credit your account as though the receivable has been paid. You will pay a fee for this service on top of the interest rate they charge. In Accounts Receivable financing you are negotiating a secured line of credit that will provide an eligibility provision regarding the aging of the accounts receivable. Depending on the industry and the historical dilution experienced by your company the financing institution will determine an advance rate. Under the A/R financing you control your receivables and manage them in accordance with company policy. So if you have confidence in your customer base I strongly recommend Receivable financing. Under both scenarios, the lending institution will examine the financial condition of your company and use them as a basis for interest rate and advance rate.
Dan,
I work with a partner firm that provides A/R factoring. They provide an on line solution with some qualifications required; time in business and revenue levels. I would be happy to talk with you and facilitate an introduction. You can reach me at [email protected] or 804.221.2379 if interested in
Rob
Wow, very helpful and thanks for all the great comments, insights and offers. I realize I already have connections at a number of these institutions, but I had not thought of them as avenues for this sort of financing. So I will start lighting some of those up. And thanks for the comments on factoring vs. financing. Greatly appreciated, all!
Is your objective only to improve cash flow?
I echo Pete and Arnold’s comments. Also, whereas factoring or invoice discounting will improve your cash flow, both are expensive relative to a line of credit. As with any technique, factoring solves some problems but not all. Companies with a small spread between revenue and cost of sales should limit their use of factoring only to transactions above their "breakeven” point (where revenue from the sale, less the cost of the sale, plus the cost of factoring is net positive). Otherwise, you're operating at a loss. Also, be mindful, in some industries, there’s a perception that a business that factors might be in financial distress. I’m definitely not suggesting that’s the case here.
Consider the benefits of Credit
1) Enables the business to transfer the risk of nonpayment to the insurance company - protects against catastrophic loss (customer bankruptcy) and “slow pay” (payment default)
2) Protects the business against the credit risk associated with large concentrated accounts
3) Assists the business in monitoring the financial condition of its insured accounts (the business can select which customers and accounts it wants to insure)
4) Enables the business to increase credit limits and terms to existing customers (increased sales and profitability)
5) Enables the business to locate and sell to new markets and customers (both domestic and foreign) with favorable terms
6) Provides "political risk" protection (political changes or instability) on foreign accounts bringing export receivables back into the company’s borrowing base
7) Premiums are inexpensive at less than 1% of sales (subject to underwriting)
As a result, overall, the business benefits from better borrowing terms, higher advance rates and an increased borrowing base, thus, more working capital.
Obviously, depending on the situation, a business can combine both forms of financing (factoring + line of credit) to reduce their cost of funds while improving cash flow.
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